For the financial year 2012-13, the Government has put in place a regime to provide tax relief to companies by allowing tax losses to be carried back and receive a refund against tax previously paid.

This regime is applicable only to corporate tax entities which includes the following:

  • Corporate Limited Partnerships
  • Companies
  • Corporate Unit Trusts
  • Public Trading Trusts

Let us use a hypothetical example of a company where it’s financial position are outlined in the table below.

Year Profit / (Loss)
2010-11 $3.5 million
2011-12 $2 million
2012-13 ($2 million)

Taking the example above, the following observations can be made:

  1. For the 2012-13 year, there is an unsued tax loss. Under the transitional rules, this loss can only be carried back one year which in the example above, will apply to the 2011-12 year.
  2. A maximum of $1 million loss can be carried back to offset the profit in the 2011-12 year. This will create a refund for tax paid on the full $2 million profit made in 2011-12.
  3. If the maximum cap loss of $1 million is not fully used, any residual loss balance can be carried forward into future years.

The choice to apply this loss carry-back must be made at the time when the company lodges its tax return for the current financial year.

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